September 28, 2023

The Breakage: Light’s RJ plan offers a haircut up to 60% off; You will still hear creditors

Light is about to present its judicial recovery plan, proposing six alternatives to creditors that could reduce the company’s debt by about R$6 billion.

Light asked about his RJ at holdingLight SA, which was extended to include its two operating companies: Light SESA, a distributor of Rio which has R$9 billion in debt; and Light Energia, an energy generator that has a debt of R$1.8 billion.

Octavio Pereira LopezIn CEO Octavio Pereira-López’s plan, the company has designed options that dialogue with each creditor profile – divided into two large blocks.

The first block, which includes four of the six alternatives, guarantees that the full amount will be paid – but with an extension of the debt. The second states that a Hair cut ranging from 20% to 60%

The first of the substitutions is designed for small creditors, who have up to R$10,000 in company bonds.

For these bondholders – about 25,000 out of a total of 40,000 – Light proposes paying the entire amount in cash, which would represent an expense of about R$150 million for the company.

The second option is to convert the debt into light shares at a price yet to be determined. The company has capped that option at up to R$3 billion – which, at screen price, would generate 40% dilution for existing shareholders.

Another alternative—made for what Light calls “Light Energia’s co-creditors” (generator)—is to take out full debt with a new bond issue maturing in five years, extending the existing debt by two years.

Therefore, these creditors are required to support the company’s plan to separate Light Energia from Light SA, and transfer part of the generator funds to holding (500 million reais out of a total of reais 800 million).

As for what it called “Light SESA Partners Creditors,” it was proposed that for every R$1.2 that these creditors invest in the company’s FIDC (Additional Bankruptcy Credit with Guaranteed Receivables), R$1 of the entire credit would be received through the issuance of a new bond with 15-year maturities. year.

If the obligation on this option reaches the maximum debt of R$1.25 billion, this option would raise approximately R$1.5 billion.

In the second group, Light suggested two alternatives. The first is to receive the amount in cash, but with Hair cut To be determined by reverse auction, with a minimum company required discount of 60%.

This option will be funded from funds raised by FIDC and will be limited to R$3 billion in debt, requiring R$1.2 billion from FIDC. (The remainder of the amount raised by FIDC will be used for the distributor’s working capital.)

The second alternative is to get the amount at a 20% discount, but in installments over 15 years and corrected by the IPCA.

RJ’s plan also includes a capitalization of R$700 million to be provided by Light SA in Light SESA. (a holding Already a box Under the plan, it will receive an additional R500 million from Light Energia).

Light has more than 40,000 bondholders, 250 investment funds and 10 financial institutions as creditors. For the plan to be approved, 50% must vote for it plus 1% of the total debt.

However, the plan may still be subject to modifications, given that Light will still be talking with creditors to receive it comment.

Of the R$10.8 billion in debt, about R$3 billion Bond holdersrepresented by Moelis and Beneiro Neto who have a more positive attitude towards RJ.

However, there is another R$1 billion of creditors the company has called “bellicose” – the funds that have been most vocal against RJ – which is represented by Lefosse Advogados.

Peter Arbex